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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-38914

 

Celularity Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

83-1702591

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

 

170 Park Ave, Florham Park, NJ

(Address of principal executive offices)

07932

(Zip Code)

 

 

(908) 768-2170

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Class A Common Stock, par value $0.0001 per share

 

CELU

 

The Nasdaq Stock Market LLC

Warrants, each exercisable for one share of Class A Common Stock at an exercise price of $115 per share

 

CELUW

 

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of October 15, 2024, the registrant had 21,984,614 shares of Class A common stock, $0.0001 par value per share, outstanding.

 

 


 

Table of Contents

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements

1

Condensed Consolidated Balance Sheets

1

Condensed Consolidated Statements of Operations and Comprehensive Loss

2

 

Condensed Consolidated Statements of Stockholders’ Equity

3

Condensed Consolidated Statements of Cash Flows

4

Notes to Unaudited Condensed Consolidated Financial Statements

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

35

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

45

Item 4.

Controls and Procedures

45

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

47

Item 1A.

Risk Factors

47

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

48

Item 3.

Defaults Upon Senior Securities

48

Item 4.

Mine Safety Disclosures

48

Item 5.

Other Information

48

Item 6.

Exhibits

48

Signatures

50

 

Unless the context indicates otherwise, references in this quarterly report to the “Company,” “Celularity,” “we,” “us,” “our” and similar terms refer to Celularity Inc. and its consolidated subsidiaries.

The Celularity logo, Celularity IMPACT, Biovance, Interfyl, Lifebank, CentaFlex and other trademarks or service marks of Celularity Inc. appearing in this quarterly report are the property of Celularity Inc. This quarterly report on Form 10-Q also contains registered marks, trademarks and trade names of other companies. All other trademarks, registered marks and trade names appearing herein are the property of their respective holders

On February 28, 2024, we effected a 1-for-10 reverse stock split of our outstanding shares of Class A common stock. Unless specifically provided otherwise herein, all share and per share information in this quarterly report on Form 10-Q has been adjusted to reflect the reverse stock split.

i


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements contained in this quarterly report on Form 10-Q, including the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations," constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, or the Exchange Act. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. These statements relate to our future events, including our anticipated operations, research, development and commercialization activities, clinical trials, operating results and financial condition. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. Forward-looking statements may include, but are not limited to, express or implied statements about:

the success, cost, timing and potential indications of our cellular therapy candidate development activities and clinical trials, as well as our ability to expand our biomaterials business and leverage our core expertise in cellular therapeutic development and manufacturing to generate revenues by providing contract manufacturing and development services to third parties;
the size of the markets for our therapeutic candidates and biomaterials products, and our ability to serve those markets;
timing of the initiation, enrollment and completion of any potential clinical trials in the United States and foreign countries;
our ability to obtain and maintain regulatory approval of our therapeutic candidates in any of the indications for which we plan to develop them, and any related restrictions, limitations, and/or warnings in the label of any approved therapeutic;
our ability to regain compliance with Nasdaq's continued listing standards
our ability to obtain funding for our operations, including funding necessary to complete the clinical trials of any of our therapeutic candidates;
our ability and plans to research, develop, manufacture and commercialize our therapeutic candidates, as well as our degenerative disease products;
our ability to attract and retain collaborators with development, regulatory and commercialization expertise;
our ability to successfully commercialize our therapeutic candidates and biomaterials products;
our ability to develop and maintain sales and marketing capabilities, whether alone or with potential future collaborators;
our expenses, future revenues, capital requirements and needs for additional financing;
our use of cash and other resources; and
our expectations regarding our ability to obtain and maintain intellectual property protection for our therapeutic candidates, degenerative disease products, and our ability to operate our business without infringing on the intellectual property rights of others.

These forward-looking statements are based on information available as of the date of this quarterly report, and current expectations, forecasts and assumptions, and involve a number of risks and uncertainties that could cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. Some factors that could cause actual results to differ include:

We have incurred net losses in every period since our inception, have no cellular therapeutic candidates approved for commercial sale and we anticipate that we will incur substantial net losses in the future. There is substantial doubt about our ability to continue as a going concern, which may affect our ability to obtain future financing and may require us to curtail our operations. We will need to raise additional capital to support our operations. This additional funding may not be available on acceptable terms or at all. Failure to obtain this necessary capital or address our liquidity needs may force us to delay, limit or terminate our operations, make further reductions in our workforce, discontinue our commercialization efforts for our biomaterials products as well as other clinical trial programs, liquidate all or a portion of our assets or pursue other strategic alternatives, and/or seek protection under the provisions of the U.S. Bankruptcy Code.
If sales of our currently commercialized biomaterial products decline significantly and we do not have alternative products to market, our business would be significantly harmed.
Our placental-derived cellular therapy candidates represent a novel approach to cancer, infectious and degenerative disease treatments that creates significant challenges.

ii


 

If we are unable to obtain regulatory approval for our lead candidates and effectively commercialize our lead therapeutic candidates for the treatment of patients in approved indications, our business would be significantly harmed.
We rely on distribution arrangements for the sale of our biomaterials products. We may incur costs to meet demand forecasts that do not materialize or we may be unable to meet demand if our distribution partners do not provide adequate forecasts.
Our commercial biomaterials business may be impacted if regulatory authorities determine that certain of our products that are, or are derived from, human cells or tissues do not qualify for reimbursement. For example, during 2022, the Center for Medicare & Medicaid Services, or CMS, began rejecting claims for Interfyl submitted by one of our distribution partners which has not yet been resolved.
We will continue to rely on third parties to conduct potential future clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval of, or commercialize, our therapeutic candidates.
The U.S. Food and Drug Administration, or FDA, regulatory approval process is lengthy and time-consuming, and we may experience significant delays in the clinical development and regulatory of our therapeutic candidates.
We may not be able to file Investigational New Drug, or IND, applications to commence additional clinical trials on the timelines we expect, and even if we are able to, the FDA may not permit us to proceed without additional information or at all, and if so, we may encounter substantial delays in our clinical trials or may not be able to conduct our trials on the timelines we expect.
We operate our own manufacturing and storage facility, which requires significant resources; manufacturing or other failures could adversely affect our clinical trials and the commercial viability of our therapeutic candidates and our biobanking and degenerative diseases businesses. We may not be successful in our plan to leverage our core expertise in cellular therapeutic development and manufacturing to generate revenues by providing contract manufacturing and development services to third parties.
We rely on donors of healthy human full-term post-partum placentas to manufacture our therapeutic candidates and biomaterials products, and if we do not obtain an adequate supply of such placentas from qualified donors, development of our placental-derived allogeneic cells may be adversely impacted.
Our potential future clinical trials may fail to demonstrate the safety and/or efficacy of any of our therapeutic candidates, which would prevent or delay regulatory approval and commercialization.
If our efforts to protect the proprietary nature of the intellectual property related to our technologies are inadequate, we may not be able to compete effectively in our market.
We are, and in the future may be, party to agreements with third parties. Disputes may arise with such third parties regarding the terms of such agreements, including terms governing payment obligations, contractual interpretation, or related intellectual property ownership or use rights, which could materially adversely impact us, including by requiring the payment of additional amounts, or requiring us to invest time and money in litigation or arbitration.
Our therapeutic candidates may cause undesirable side effects or have other properties that could halt their clinical development, prevent their regulatory approval, limit their commercial potential or result in significant negative consequences.
We face significant competition from other biotechnology and pharmaceutical companies, and our operating results will suffer if we fail to compete effectively.
Our relationship with customers, physicians, and third-party payors are subject to numerous laws and regulations. If we or our employees, independent contractors, consultants, commercial partners and vendors violate these laws, we could face substantial penalties.
Our business could be materially adversely affected by the effects of health pandemics or epidemics, as well as geopolitical conflicts, inflation, bank failures and recessions, in regions where we or third parties on which we rely have concentrations of clinical trial sites or other business operations.
We will continue to incur significant costs as a result of operating as a public company, and our management will be required to devote substantial time to various compliance initiatives.

For a further discussion of these and other factors that could cause our future results, performance or transactions to differ significantly from those expressed in any forward-looking statement, please see the section titled “Risk Factors” in our annual report on Form 10-K filed with the Securities and Exchange Commission on July 30, 2024, or the "2023 Form 10-K." Given these risks, you should not place undue reliance on any forward-looking statements, which are based only on information currently available to us (or

iii


 

to third parties making the forward-looking statements). While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. Except to the extent required by applicable law, we are under no obligation (and expressly disclaim any such obligation) to update or revise their forward-looking statements whether as a result of new information, future events, or otherwise.

 

iv


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Celularity Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

 

 

 

March 31,
2024

 

 

December 31,
2023

 

 

(unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,902

 

 

$

227

 

Accounts receivable, net of allowance of $6,038 and $5,837 as of March 31,2024 and December 31, 2023, respectively

 

 

13,769

 

 

 

10,046

 

Notes receivable

 

 

2,072

 

 

 

2,072

 

Inventory

 

 

3,701

 

 

 

5,753

 

Prepaid expenses and other current assets

 

 

1,411

 

 

 

1,695

 

Total current assets

 

 

22,855

 

 

 

19,793

 

Property and equipment, net

 

 

66,268

 

 

 

67,828

 

Goodwill

 

 

7,347

 

 

 

7,347

 

Intangible assets, net

 

 

10,455

 

 

 

11,001

 

Right-of-use assets - operating leases

 

 

10,945

 

 

 

10,990

 

Restricted cash

 

 

10,046

 

 

 

9,936

 

Inventory, net of current portion

 

 

15,573

 

 

 

16,657

 

Other long-term assets

 

 

327

 

 

 

337

 

Total assets

 

$

143,816

 

 

$

143,889

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

12,983

 

 

$

14,144

 

Accrued expenses and other current liabilities

 

 

8,755

 

 

 

7,580

 

Accrued R&D software

 

 

1,700

 

 

 

3,500

 

Short-term debt - unaffiliated (includes debt measured at fair value of $2,183 at March 31, 2024 and $17,223 at December 31, 2023, respectively)

 

 

5,101

 

 

 

19,331

 

Short-term debt - related parties

 

 

34,699

 

 

 

19,909

 

Deferred revenue

 

 

2,806

 

 

 

2,834

 

Total current liabilities

 

 

66,044

 

 

 

67,298

 

Deferred revenue, net of current portion

 

 

3,265

 

 

 

3,186

 

Acquisition-related contingent consideration

 

 

1,606

 

 

 

1,606

 

Noncurrent lease liabilities - operating

 

 

26,265

 

 

 

26,177

 

Warrant liabilities

 

 

15,092

 

 

 

4,359

 

Deferred income tax liabilities

 

 

9

 

 

 

9

 

Other liabilities

 

 

290

 

 

 

294

 

Total liabilities

 

 

112,571

 

 

 

102,929

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

Preferred stock, $0.0001 par value, 10,000,000 shares authorized, none issued and outstanding
at March 31, 2024 and December 31, 2023

 

 

-

 

 

 

-

 

Common Stock, $0.0001 par value, 730,000,000 shares authorized, 21,808,752 issued and outstanding as of March 31, 2024; 730,000,000 shares authorized, 19,378,192 issued and outstanding as of December 31, 2023

 

 

2

 

 

 

2

 

Additional paid-in capital

 

 

895,047

 

 

 

882,749

 

Accumulated deficit

 

 

(863,804

)

 

 

(841,791

)

Total stockholders’ equity

 

 

31,245

 

 

 

40,960

 

Total liabilities and stockholders’ equity

 

$

143,816

 

 

$

143,889

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

1


 

Celularity Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

(In thousands, except share and per share amounts)

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Net revenues

 

 

 

 

 

 

Product sales

 

$

12,843

 

 

$

1,043

 

Services

 

 

1,287

 

 

 

1,357

 

License, royalty and other

 

 

551

 

 

 

1,535

 

Total revenues

 

 

14,681

 

 

 

3,935

 

Operating expenses

 

 

 

 

 

 

Cost of revenues (excluding amortization of acquired intangible assets)

 

 

 

 

 

 

Product sales

 

 

1,222

 

 

 

722

 

Services

 

 

177

 

 

 

472

 

License, royalty and other

 

 

241

 

 

 

809

 

Research and development

 

 

5,843

 

 

 

16,951

 

Software cease-use costs

 

 

-

 

 

 

23,675

 

Selling, general and administrative

 

 

14,028

 

 

 

13,934

 

Change in fair value of contingent consideration liability

 

 

-

 

 

 

(18,932

)

Goodwill impairment

 

 

-

 

 

 

29,633

 

Amortization of acquired intangible assets

 

 

546

 

 

 

541

 

Total operating expenses

 

 

22,057

 

 

 

67,805

 

Loss from operations

 

 

(7,376

)

 

 

(63,870

)

Other income (expense):

 

 

 

 

 

 

Interest income

 

 

110

 

 

 

116

 

Interest expense

 

 

(1,148

)

 

 

(277

)

Change in fair value of warrant liabilities

 

 

(8,875

)

 

 

1,735

 

Change in fair value of debt

 

 

81

 

 

 

(1,280

)

Loss on debt extinguishment

 

 

(3,908

)

 

 

-

 

Other expense, net

 

 

(897

)

 

 

(441

)

Total other expense

 

 

(14,637

)

 

 

(147

)

Loss before income taxes

 

 

(22,013

)

 

 

(64,017

)

Income tax expense (benefit)

 

 

-

 

 

 

-

 

Net loss

 

$

(22,013

)

 

$

(64,017

)

Change in fair value of debt due to change in credit risk, net of tax

 

 

-

 

 

 

2,658

 

Other comprehensive income

 

 

-

 

 

 

2,658

 

Comprehensive loss

 

$

(22,013

)

 

$

(61,359

)

Share information:

 

 

 

 

 

 

Net loss per share - basic and diluted

 

$

(1.03

)

 

$

(4.12

)

Weighted average shares outstanding - basic and diluted

 

 

21,440,980

 

 

 

15,536,501

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

2


 

Celularity Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

(In thousands, except share amounts)

 

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated

 

 

Accumulated Other Comprehensive

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Equity

 

Balances at January 1, 2024

 

 

19,378,192

 

 

$

2

 

 

$

882,749

 

 

$

(841,791

)

 

$

-

 

 

$

40,960

 

Issuance of common stock to Yorkville for debt extension and SEPA commitment fee

 

 

116,964

 

 

 

-

 

 

 

317

 

 

 

-

 

 

 

-

 

 

 

317

 

Issuance and modification of warrants to RWI and C.V. Starr

 

 

-

 

 

 

-

 

 

 

3,322

 

 

 

-

 

 

 

-

 

 

 

3,322

 

Issuance of common stock and warrants in PIPE Offering, net of offering expenses

 

 

2,141,098

 

 

 

-

 

 

 

6,000

 

 

 

 

 

 

-

 

 

 

6,000

 

Vesting of restricted stock units

 

 

233,361

 

 

 

-

 

 

 

-

 

 

 

 

 

 

-

 

 

 

-

 

Tax withholding on vesting of restricted stock units

 

 

(80,672

)

 

 

-

 

 

 

(357

)

 

 

-

 

 

 

-

 

 

 

(357

)

Issuance of common stock to Palantir as consideration for settlement agreement

 

 

20,000

 

 

 

-

 

 

 

50

 

 

 

-

 

 

 

-

 

 

 

50

 

Retirement of shares in connection with reverse stock split

 

 

(191

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

2,966

 

 

 

-

 

 

 

-

 

 

 

2,966

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(22,013

)

 

 

-

 

 

 

(22,013

)

Balances at March 31, 2024

 

 

21,808,752

 

 

$

2

 

 

$

895,047

 

 

$

(863,804

)

 

$

-

 

 

$

31,245

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at January 1, 2023

 

 

14,892,129

 

 

$

1

 

 

$

844,387

 

 

$

(645,496

)

 

$

9

 

 

$

198,901

 

Exercise of stock options

 

 

107,100

 

 

 

-

 

 

 

300

 

 

 

-

 

 

 

-

 

 

 

300

 

Common stock issued pursuant to short-term debt conversion

 

 

365,612

 

 

 

-

 

 

 

3,510

 

 

 

-

 

 

 

(152

)

 

 

3,358

 

Issuance of common stock in PIPE Offering, net of offering expenses

 

 

938,183

 

 

 

-

 

 

 

8,931

 

 

 

-

 

 

 

-

 

 

 

8,931

 

Issuance of common stock for stem-cells to be used in research and development

 

 

169,492

 

 

 

-

 

 

 

1,000

 

 

 

-

 

 

 

-

 

 

 

1,000

 

Vesting of restricted stock units

 

 

25,339

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Tax withholding on vesting of restricted stock units

 

 

(8,110

)

 

 

-

 

 

 

(53

)

 

 

-

 

 

 

-

 

 

 

(53

)

Issuance of common stock under ATM Agreement

 

 

13,296

 

 

 

-

 

 

 

136

 

 

 

-

 

 

 

-

 

 

 

136

 

Issuance of warrants on senior secured bridge loan

 

 

-

 

 

 

-

 

 

 

274

 

 

 

-

 

 

 

-

 

 

 

274

 

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

3,988

 

 

 

-

 

 

 

-

 

 

 

3,988

 

Change in fair value of debt due to change in credit risk, net of tax

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,810

 

 

 

2,810

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(64,017

)

 

 

-

 

 

 

(64,017

)

Balances at March 31, 2023

 

 

16,503,041

 

 

$

1

 

 

$

862,473

 

 

$

(709,513

)

 

$

2,667

 

 

$

155,628

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

3


 

Celularity Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Cash flow from operating activities:

 

 

 

 

 

 

Net loss

 

$

(22,013

)

 

$

(64,017

)

Adjustments to reconcile net loss to net cash used in operations:

 

 

 

 

 

 

Depreciation and amortization

 

 

2,156

 

 

 

2,363

 

Non cash lease expense

 

 

45

 

 

 

(19

)

Provision for doubtful accounts

 

 

201

 

 

 

611

 

Provision for inventory obsolescence

 

 

(45

)

 

 

-

 

Change in fair value of warrant liabilities

 

 

8,875

 

 

 

(1,735

)

Goodwill impairment

 

 

-

 

 

 

29,633

 

Stock-based compensation expense

 

 

2,966

 

 

 

3,988

 

Change in fair value of contingent consideration

 

 

-

 

 

 

(18,932

)

Acquired in-process research and development

 

 

-

 

 

 

3,000

 

Issuance of common stock for stem-cells to be used in research and development

 

 

-

 

 

 

1,000

 

Issuance of common stock to Palantir as consideration for settlement agreement

 

 

50

 

 

 

-

 

Issuance of common stock relating to Yorkville for debt extension and SEPA commitment fee

 

 

317

 

 

 

-

 

Change in fair value of contingent stock consideration

 

 

-

 

 

 

(110

)

Loss on extinguishment of debt

 

 

3,908

 

 

 

-

 

Change in fair value of debt

 

 

(81

)

 

 

1,280

 

Non cash interest expense

 

 

1,148

 

 

 

-

 

Other, net

 

 

181

 

 

 

272

 

Changes in assets and liabilities:

 

 

-

 

 

 

 

Accounts receivable

 

 

(3,924

)

 

 

791

 

Inventory

 

 

3,181

 

 

 

(1,813

)

Prepaid expenses and other assets

 

 

294

 

 

 

1,463

 

Accounts payable

 

 

(1,172

)

 

 

2,730

 

Accrued expenses and other liabilities

 

 

1,171

 

 

 

729

 

Accrued R&D software

 

 

(1,800

)

 

 

23,675

 

Lease liabilities - operating

 

 

88

 

 

 

64

 

Deferred revenue

 

 

51

 

 

 

32

 

Net cash used in operating activities

 

 

(4,403

)

 

 

(14,995

)

Cash flow from investing activities:

 

 

 

 

 

 

Capital expenditures

 

 

(39

)

 

 

(209

)

Purchase of acquired in-process research and development

 

 

-

 

 

 

(3,000

)

Net cash used in investing activities

 

 

(39

)

 

 

(3,209

)

Cash flow from financing activities:

 

 

 

 

 

 

Proceeds from warrants and short-term debt - related parties

 

 

15,000

 

 

 

4,994

 

Proceeds from the exercise of stock options

 

 

-

 

 

 

300

 

Repayments of short-term debt - unaffiliated

 

 

(17,374

)

 

 

(1,618

)

Proceeds from issuance of short-term debt - unaffiliated

 

 

2,993

 

 

 

-

 

Payment of SEPA commitment fee

 

 

(25

)

 

 

-

 

Repayments of short-term debt - related parties

 

 

(10

)

 

 

-

 

Proceeds from PIPE Offering, net of offering costs

 

 

6,000

 

 

 

9,000

 

Proceeds from the sale of common stock in ATM offering

 

 

-

 

 

 

136

 

Tax withholding on vesting of restricted stock units

 

 

(357

)

 

 

(53

)

Net cash provided by financing activities

 

 

6,227

 

 

 

12,759

 

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

1,785

 

 

 

(5,445

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

10,163

 

 

 

28,802

 

Cash, cash equivalents and restricted cash at end of period

 

$

11,948

 

 

$

23,357

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Cash paid for interest

 

$

-

 

 

$

251

 

Supplemental non-cash investing and financing activities:

 

 

 

 

 

 

Property and equipment included in accounts payable and accrued expenses

 

$

(11

)

 

$

(697

)

Modification of C.V. Starr warrants in connection with forbearance

 

$

51

 

 

$

-

 

Issuance of RWI warrants in connection with forbearance

 

$

1,223

 

 

$

-

 

Issuance of warrants on senior secured bridge loan

 

$

-

 

 

$

274

 

PIPE related offering costs included in accrued expenses

 

$

-

 

 

$

(69

)

Common stock issued for short-term debt conversion

 

$

-

 

 

$

3,510

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4


 

Celularity Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(in thousands, except share and per share amounts)

1.
Nature of Business

Celularity Inc., ("Celularity” or the "Company”), formerly known as GX Acquisition Corp. ("GX”), was a blank check company incorporated in Delaware on August 24, 2018. The Company was formed for the purpose of effectuating a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses.

On July 16, 2021 (the "Closing Date”), the Company consummated the previously announced merger pursuant to the Merger Agreement and Plan of Reorganization, dated January 8, 2021 (the "Merger Agreement”), by and among GX, Alpha First Merger Sub, Inc., a Delaware corporation and a direct, wholly owned subsidiary of GX ("First Merger Sub”), Celularity LLC (f/k/a Alpha Second Merger Sub LLC), a Delaware limited liability company and a direct, wholly owned subsidiary of GX ("Second Merger Sub”), and the entity formerly known as Celularity Inc., incorporated under the laws of the state of Delaware on August 29, 2016 ("Legacy Celularity”). Upon completion of the merger transaction, GX changed its name to Celularity Inc.

At the special meeting held on February 22, 2024, the stockholders of Celularity approved an amendment to Celularity’s Second Amended and Restated Certificate of Incorporation, as amended, to effect a reverse stock split of Celularity’s Class A common stock, par value $0.0001 per share, at a ratio of 1-for-10. Following the reverse stock split, each 10 shares of Celularity’s Class A Common Stock issued and outstanding immediately prior thereto were combined into one new share of Class A Common Stock. Unless specifically provided otherwise herein, all share and per share information has been adjusted to reflect the reverse stock split.

Description of Business

Celularity is a cell therapy and regenerative medicine company focused on addressing aging related diseases including cancer and degenerative diseases. Celularity develops and markets off-the-shelf placental-derived allogeneic advanced biomaterial products including allografts and connective tissue matrices for soft tissue repair and reconstructive procedures in the treatment of degenerative disorders and diseases including those associated with aging. Celularity is developing a pipeline of off-the-shelf placental-derived allogeneic cell therapy product candidates including T cells engineered with a chimeric antigen receptor ("CAR"), natural killer ("NK") cells, and mesenchymal-like adherent stromal cells ("MLASCs") and exosomes. These therapeutic candidates may potentially target indications across cancer, infectious and degenerative diseases. Celularity believes that by harnessing the placenta’s unique biology and ready availability, it will be able to develop therapeutic solutions that address a significant unmet global need for effective, accessible and affordable therapeutics. Celularity's biomaterials business today is comprised primarily of the sale of its Biovance 3L products, directly or through its distribution network. Biovance 3L is a tri-layer decellularized, dehydrated human amniotic membrane derived from the placenta of a healthy, full-term pregnancy. It is an intact, natural extracellular matrix that provides a foundation for the wound regeneration process and acts as a scaffold for restoration of functional tissue. Celularity is developing new placental biomaterial products to deepen the commercial pipeline. The Company also plans to leverage its core expertise in cellular therapeutic development and manufacturing to generate revenues by providing contract manufacturing and development services to third parties. The initial focus of this new service offering will be to assist development stage cell therapy companies with the development and manufacturing of their therapeutic candidates for clinical trials.

Celularity is headquartered in Florham Park, NJ. Legacy Celularity acquired Anthrogenesis Corporation ("Anthrogenesis”) in August 2017 from Celgene Corporation ("Celgene”), a global biotechnology company that merged with Bristol Myers Squibb Company. Previously, Anthrogenesis operated as Celgene Cellular Therapeutics, Celgene’s cell therapy division.

The Celularity IMPACT (IMmunomodulatoryPlacenta-derivedAllogeneicCellular therapy) platform capitalizes on the benefits of placenta-derived cells to target multiple diseases, and provides seamless integration, from bio sourcing through manufacturing cryopreserved and packaged allogeneic cells at its purpose-built U.S.-based 147,215 square foot facility. Celularity believes the use of placental-derived cells, sourced from the placentas of full-term healthy informed consent donors, has potential inherent advantages, from a scientific and an economic perspective. First, relative to adult- derived cells, placental-derived cells demonstrate greater stemness, meaning the ability to expand and persist. Second, placental-derived cells are immunologically naïve, meaning the cells have never been exposed to a specific antigen, and suggesting the potential for less toxicity and for low or no graft-versus-host disease, or GvHD, in transplant. Third, Celularity’s placental-derived cells are allogeneic, meaning they are intended for use in any patient, as compared to autologous cells, which are derived from an individual patient for that patient’s use. Celularity believes this is a key difference that will enable readily available off-the-shelf treatments that can be delivered faster, more reliably, at greater scale and to more patients.

From a single source material, the postpartum human placenta, the Company derives four allogeneic cell or extracellular vesicle types: T cells, NK cells, MLASCs and exosomes, which have the potential to support multiple therapeutic programs. In 2022, the Company had active and approved clinical trials under development utilizing CYNK-001, a placental derived unmodified NK cell, for the treatment of acute myeloid leukemia, or AML, a blood cancer, and for glioblastoma multiforme, or GBM, a solid tumor cancer. The Company also had an active clinical trial utilizing CYNK-101, a genetically modified NK cell, for the treatment of HER2+ Gastric cancer. Due to a need to prioritize corporate resources, in January 2023 the Company announced its intention to cease recruitment in the GBM and the HER2+ gastric trials. In addition, in April 2023, the Company announced based on the preliminary results of the phase 1 trial data of CYNK-001, the AML trial would be closed to further enrollment and has completed follow up. The Company is currently

5


 

not actively investigating CYNK-001 for any indication. During the second quarter of 2023, the Company fully impaired the in-process research and development ("IPR&D") assets associated with CYNK-001. In the first quarter of 2022, the Company submitted an IND to investigate CYCART-19, a placental-derived CAR-T cell therapy targeting the cluster of differentiation 19, for the treatment of B-cell malignancies. In late May 2022, the Company received formal written communication from the U.S. Food and Drug Administration requesting additional information before it can proceed with the planned Phase 1/2 clinical trial. After assessing the status of the IND to determine an optional path forward for the CYCART-19 program, the Company elected to terminate development of CYCART-19 for B-cell malignancies during the third quarter of 2023. The Company may continue pre-clinical development of other T-cell candidates. APPL-001 is a placenta-derived MLASC being developed for the treatment of Crohn’s disease, and other degenerative diseases. Due to an internal alignment of corporate resources, the Company has paused development in exosomes to focus on other priorities.

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with governmental regulations and the ability to secure additional capital to fund operations. Drug candidates currently under development will require significant additional approval prior to commercialization, including extensive preclinical and clinical testing and regulatory approval. These efforts require significant amounts of additional capital, adequate personnel, and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s drug development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.

Going Concern

The Company has evaluated whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the condensed consolidated financial statements are issued.

As an emerging clinical-stage biotechnology company, Celularity is subject to certain inherent risks and uncertainties associated with the development of an enterprise. In this regard, since the Company’s inception, substantially all of management’s efforts have been devoted to making investments in research and development including basic scientific research into placentally-derived allogeneic cells, pre-clinical studies to support its current and future clinical programs in cellular therapeutics, and clinical development of its cell programs as well as facilities and selling, general and administrative expenses that support its core business operations (collectively, the "investments”), all at the expense of the Company’s short-term profitability. The Company has historically funded these investments through limited revenues generated from its biobanking and degenerative disease businesses and issuances of equity and debt securities to public and private investors (these issuances are collectively referred to as "outside capital”). Notwithstanding these efforts, management can provide no assurance that the Company’s research and development and commercialization efforts will be successfully completed, or that adequate protection of the Company’s intellectual property will be adequately maintained. Even if these efforts are successful, it is uncertain when, if ever, the Company will generate significant sales or operate in a profitable manner to sustain the Company’s operations without needing to continue to rely on outside capital. Continued decline in the Company’s share price could result in impairment of goodwill or long-lived assets in a future period.

As of the date the accompanying condensed consolidated financial statements were issued, or the issuance date, management evaluated the significance of the following adverse conditions and events in accordance with ASU 205-40:

 

Since its inception, the Company has incurred significant operating losses and net cash used in operating activities. For the three months ended March 31, 2024, the Company incurred an operating loss of $7,376 and net cash used in operating activities of $4,403. As of March 31, 2024, the Company had an accumulated deficit of $863,804. The Company expects to continue to incur significant operating losses and use net cash for operations for the foreseeable future.
 
The Company expects to incur substantial expenditures to fund its investments for the foreseeable future. In order to fund these investments, the Company will need to secure additional sources of outside capital. While the Company is actively seeking to secure additional outside capital (and has historically been able to successfully secure such capital), as of the issuance date, no additional outside capital has been secured or was deemed probable of being secured. In addition, management can provide no assurance that the Company will be able to secure additional outside capital in the future or on terms that are acceptable to the Company. Absent an ability to secure additional outside capital in the very near term, the Company will be unable to meet its obligations as they become due over the next 12 months beyond the issuance date.
As of the issuance date, the Company had approximately $44,224 of debt outstanding, all of which is currently due or due within one year of the issuance date. As disclosed in Note 7, substantially all of the Company’s outstanding debt is subject to a forbearance agreement. In the event the terms of the forbearance agreements are not met and/or the outstanding borrowings are not repaid, the lenders may, at their discretion, exercise all of their rights and remedies under the loan agreements which may include, among other things, seizing the Company’s assets and/or forcing the Company into liquidation.
On August 22, 2024, Nasdaq provided formal notice to the Company that as a result of Company’s failure to timely file its Form 10-Q for the quarter ended June 30, 2024, and because the Company remained delinquent in filing this Form 10-Q for the quarter ended March 31, 2024, the Company does not comply with the continued listing requirements under the

6


 

timely filing criteria outlined in Nasdaq Listing Rule 5250(c) (1). On September 5, 2024, the Company submitted a plan to Nasdaq to regain compliance and on September 17, 2024, received notification from Nasdaq that the compliance plan was accepted. Under the plan, Nasdaq granted the Company an extension until October 14, 2024, to file this Form 10-Q for the quarter ended March 31, 2024 and the Form 10-Q for the quarter ended June 30, 2024. As of the date of this filing, the Company expects that Nasdaq will provide notification of a delisting determination, which can be appealed to a Nasdaq Hearings Panel. Upon receipt of the written notification, the Company intends to timely appeal Nasdaq’s determination. There can be no assurance that the Company will timely file such an appeal, that the Nasdaq Hearings Panel will grant any relief, or that the Company will regain compliance within the compliance period or maintain compliance with the other Nasdaq listing requirements. If relief is not granted by the Nasdaq Hearings Panel or the Company is unable to regain compliance, the Company’s securities will be delisted from the Nasdaq, which such delisting could have a materially adverse effect on the Company’s ability to continue as a going concern.
In the event the Company is unable to secure additional outside capital to fund the Company’s obligations when they become due over the next 12 months beyond the issuance date, which includes the funds needed to repay the Company’s outstanding debt, management will be required to seek other strategic alternatives, which may include, among others, a significant curtailment of the Company’s operations, a sale of certain of the Company’s assets, a sale of the entire Company to strategic or financial investors, and/or allowing the Company to become insolvent by filing for bankruptcy protection under the provisions of the U.S. Bankruptcy Code.

These uncertainties raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying condensed consolidated financial statements have been prepared on the basis that the Company will continue to operate as a going concern, which contemplates that the Company will be able to realize assets and settle liabilities and commitments in the normal course of business for the foreseeable future. Accordingly, the accompanying condensed consolidated financial statements do not include any adjustments that may result from the outcome of these uncertainties.

2.
Summary of Significant Accounting Policies

Basis of Presentation

The Company’s unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The unaudited condensed consolidated financial statements include the accounts of wholly owned subsidiaries, after elimination of intercompany accounts and transactions. The unaudited condensed consolidated financial information presented herein reflects all financial information that, in the opinion of management, is necessary for a fair statement of consolidated financial position, results of operations and cash flows for the periods presented.

The Company’s condensed consolidated financial statements are prepared in accordance with the U.S. Securities and Exchange Commission’s ("SEC") rules for the presentation of interim financial statements, which permit certain disclosures to be condensed or omitted. These financial statements should be read in conjunction with the Company’s annual financial statements as of and for the year ended December 31, 2023.

In the opinion of management, the accompanying interim financial statements include all normal and recurring adjustments (which consist primarily of accruals, estimates and assumptions that impact the financial statements) considered necessary to present fairly the Company’s consolidated financial position as of March 31, 2024, and its consolidated results of operations and cash flows for the three months ended March 31, 2024 and 2023. Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. The interim financial statements, presented herein, do not contain the required disclosures under GAAP for annual financial statements. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s annual audited consolidated financial statements and related notes as of and for the year ended December 31, 2023 included in the Annual Report on Form 10-K filed with the SEC on July 30, 2024, (the “2023 Form 10-K”).

Use of Estimates

The preparation of the Company’s condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, assumptions related to the Company’s goodwill and intangible asset impairment assessments, the valuation of inventory, contingent consideration, short-term debt, determination of incremental borrowing rates, accrual of research and development expenses, and the valuations of stock options and stock warrants. The Company based its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates when there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates.

7


 

Fair Value Measurements

Certain assets and liabilities of the Company are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

• Level 1 — Quoted prices in active markets for identical assets or liabilities.

• Level 2 — Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

• Level 3 — Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

Comprehensive Income (Loss)

Comprehensive income (loss) refers to revenues, expenses, gains and losses that under U.S. GAAP are included in comprehensive income (loss) but are excluded from net income (loss) as these amounts are recorded directly as an adjustment to accumulated other comprehensive income (loss). The Company’s only component of other comprehensive income (loss) is comprised of the portion of the total change in fair value of indebtedness accounted for under the fair value option that is attributable to changes in instrument-specific credit risk. During the three months ended March 31, 2024, the Company did not have a component of other comprehensive income (loss). During the three months ended March 31, 2023, the Company recorded instrument-specific credit risk income of $2,810 and reclassified $152 from accumulated other comprehensive income to other expense on the condensed consolidated statements of operations and comprehensive loss upon short-term debt conversion. These amounts have been recorded as a separate component of stockholders’ equity.

Income Taxes

The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the condensed consolidated financial statements or in the Company's tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense. Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected and considering prudent and feasible tax planning strategies. No income tax expense was incurred during the three months ended March 31, 2024 and 2023.

Net Income (Loss) per Share

Basic net income (loss) per share of common stock is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during each period. Diluted net income (loss) per share of common stock includes the effect, if any, from the potential exercise or conversion of securities, such as redeemable convertible preferred stock, convertible debt, stock options, restricted stock units and warrants, which would result in the issuance of incremental shares of common stock. However, potential common shares are excluded if their effect is anti-dilutive. For diluted net loss per share in the three months ended March 31, 2024 and 2023 when the Company had a net loss, the weighted-average number of shares of common stock is the same for basic net loss per share due to the fact that when a net loss exists, dilutive securities are not included in the calculation as the impact is anti-dilutive.

The following potentially dilutive securities have been excluded from the computation of diluted weighted-average shares of Class A common stock outstanding, prior to the use of the two-class method, as they would be anti-dilutive:

 

 

 

For the Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Stock options

 

 

3,222,851

 

 

 

2,482,187

 

Restricted stock units

 

 

546,265

 

 

 

581,761

 

Warrants

 

 

10,905,901

 

 

 

4,359,015

 

Convertible debt

 

 

498,647

 

 

 

4,116,148

 

 

 

 

15,173,664

 

 

 

11,539,111

 

 

8


 

Segment Information

Operating segments are defined as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources in assessing performance. The Company manages its operations through an evaluation of three distinct businesses segments: Cell Therapy, Degenerative Disease and BioBanking. These segments are presented for the three months ended March 31, 2024 and 2023 in Note 14.

Allowance for Credit Losses and Concentrations of Credit Risk

With the adoption of ASU 2016-13 Financial Instruments — Credit Losses, as noted below, the Company recognizes credit losses based on a forward-looking current expected credit losses. The Company makes estimates of expected credit losses based upon its assessment of various factors, including historical collection experience, the age of accounts receivable balances, credit quality of its customers, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect its ability to collect from customers.

Concentrations of Credit Risk and Significant Customers

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents and restricted cash and accounts receivable. The Company generally maintains balances in various operating accounts at financial institutions that management believes to be of high credit quality, in amounts that may exceed federally insured limits. The Company has not experienced any losses related to its cash and cash equivalents or restricted cash and does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

The Company is subject to credit risk from trade accounts receivable related to both degenerative disease product sales and biobanking services. All trade accounts receivables are a result from product sales and services performed in the United States. As of March 31, 2024, three of the Company's customers, each of which individually comprised at least 10%, represented an aggregate 35% of the Company's outstanding gross accounts receivable. As of December 31, 2023, two of the Company's customers, each of which individually comprised at least 10%, represented an aggregate 63% of the Company's outstanding gross accounts receivable. During the three months ended March 31, 2024, the Company had two customers, each of which individually comprised at least 10%, provide for an aggregate 28% of revenue. During the three months ended March 31, 2023, the Company had two customers, each of which individually comprised at least 10%, provide for an aggregate 36% of revenue.

Emerging Growth Company

Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act”) exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which expires December 31, 2026 unless the Company is otherwise disqualified. Accordingly, when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.

This may make comparison of the Company’s condensed consolidated financial statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Reclassifications

Certain prior period amounts have been reclassified to conform with current year presentation. On the condensed consolidated balance sheets, short-term debt - Yorkville and other short-term debt were reclassified to short-term debt - unaffiliated, and short-term debt - related party and short-term debt - related parties - C.V. Starr and RWI were reclassified to short-term debt - related parties. See Note 7 for further information.

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (“ASU 2016-13”), which changes the accounting for recognizing impairments of financial assets. Under the new guidance, credit losses for certain types of financial instruments will be estimated based on expected losses. ASU 2016-13 also modifies the impairment models for available-for-sale debt securities and for purchased financial assets with credit deterioration since their origination. ASU 2016-13 is effective for annual periods beginning after December 15, 2022 (fiscal year 2023 for the Company), and interim periods within those periods, with early adoption permitted. The Company adopted ASU 2016-13 effective January 1, 2023. The standard did not have a material impact on the condensed consolidated financial statements.

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Recently Issued Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ("ASU 2023-07"), which requires disclosure of incremental segment information on an annual and interim basis. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 on a retrospective basis. The Company is currently evaluating the effect of this pronouncement on its disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09"), which expands the disclosures required for income taxes. This ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The amendment should be applied on a prospective basis while retrospective application is permitted. The Company is currently evaluating the effect of this pronouncement on its disclosures.

3.
Fair Value of Financial Assets and Liabilities

The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy used to determine such fair values:

 

 

 

Fair Value Measurements as of March 31, 2024

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Convertible note receivable

 

$

 

 

$

 

 

$

2,072

 

 

$

2,072

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition-related contingent consideration obligations

 

$

 

 

$

 

 

$

1,606

 

 

$

1,606

 

Contingent stock consideration

 

 

 

 

 

 

 

 

27

 

 

 

27

 

Short-term debt - Yorkville convertible note

 

 

 

 

 

 

 

 

2,918

 

 

 

2,918

 

Warrant liability - July 2023 Registered Direct Warrants

 

 

 

 

 

 

 

 

3,590

 

 

 

3,590

 

Warrant liability - April 2023 Registered Direct Warrants

 

 

 

 

 

 

 

 

3,598

 

 

 

3,598

 

Warrant liability - May 2022 PIPE Warrants